"We continue to believe that investors face an increasing risk of stock market volatility and potential price weakness during the next few months after the strong advance in equities since the beginning of the year," wrote Gary Thayer, chief macro strategist at Wells Fargo Advisors.

The Dow Jones Industrial Average declined 36.86 points to finish at 15,521.97, dragged by Bank of America and Hewlett-Packard. The blue-chip index traded in a narrow 75-point range.

The S&P 500 erased 6.32 points to close at 1,685.33. Still, the S&P 500 remains on pace for its best monthly gain since October 2011. And the Nasdaq fell to end at 3,599.14.

The CBOE Volatility Index (VIX), widely considered the best gauge of fear in the market, rose above 13.

Among key S&P Sectors, energy and financials led the laggards, while telecoms gained.

Beware negative earnings growth, pro warns

Three companies stand to do well amid an environment of cost-cutting, Erin Gibbs of S&P Capital IQ says.

On the economic front, pending home sales dipped 0.4 percent in June, according to the National Association of Realtors, pulling back from a six-year high from the previous month. Economists polled by Reuters had expected signed contracts to fall 1.0 percent.

About one-fifth of the S&P 500 companies report earnings in the coming week. About half of the S&P 500 has reported earnings so far, with 68 percent beating earnings estimates, and 56 percent topping revenue forecasts, according to data from Thomson Reuters.

However, market attention will mostly be on the Federal Reserve's two-day meeting, which starts on Tuesday and may give an indication of when the central bank's massive asset purchase program will be tailed back. The Bank of England and the European Central Bank will also meet this week.

"All of them are expected to touch on the subject of forward guidance, albeit to various extents," Credit Agricole analysts wrote in a research note. "The clarity of the symphony will determine the level of support to the risk appetite. Should any of them be more explicit (more dovish) about forward guidance, the market can be expected to react in a positive way."

The gross domestic product for the second quarter will be reported on Wednesday and the key payrolls report on Friday.

"These reports will be important because substantial revisions to GDP could cause some Fed officials to be more concerned about the Fed's QE program," wrote Thayer. "[And] if the jobs number on Friday are strong, investors could worry that the Fed might begin to reduce its bond purchases soon. If the jobs data are weak instead, investors are more likely to believe that the Fed will delay tapering its stimulus."

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And Omnicom and France's Publicis agreed to a merger over the weekend to create the world's largest advertising holding company, with a combined market value of $35.1 billion. Shares of Omnicom soared.

CF Industries spiked higher after Third Point's most recent investor letter revealed a new position in the company. According to the letter, Third Point said that the "structural cash flow generation strength is misunderstood" and says that the company should pay a "much larger" dividend.

Caterpillar climbed after the heavy-equipment maker said it will buy back $1 billion of its shares from French bank Societe Generale at market prices.

Facebook rose, extending gains from last week after the social-networking giant posted strong quarterly results. The stock cracked above $35 a share and is closing in on its IPO price of $38.

Meanwhile, Asian equity markets declined across the board as renewed fears of an economic slowdown in China hindered gains. Japanese stocks fell to a new four-week low on the back of the strengthening yen. The dollar-yen hit a new one-month low of 97.61 leading to a sell-off across the export-heavy Nikkei index.